Industry issues

Key issues facing companies in the UK chemicals sector include:

Effective supply chain

Globalisation has refocused the UK chemicals industry towards embracing world-class supply-chain management. Today's supply-chain improvement challenges include e-procurement, lean manufacturing, outsourcing non-core activities, reducing cash-to-cash cycles and minimising material inventories. Emerging markets such as Eastern Europe, India and China and the availability of low-cost raw materials and labour in these regions ensure continuing focus on global supply-chains. Global players are re-shaping their supply chains to remain ahead of the competition and unlock value.

Transactions - doing deals

Consolidation in both the commodity and specialty chemical sectors is changing the structure of the industry as synergies develop. Regional chemical companies are strengthening their global position while major players are divesting assets in order to focus on key areas of their business. The commodity chemicals sector is cyclical and vulnerable firms can be threatened by private equity firms actively seeking deal opportunities in the sector.

Expansion and restructuring

Tax issues will be important for chemicals companies as they continue to expand overseas. Centralisation, rationalisation and cost cutting will bring chemical companies into potential conflict with tax authorities as they seek to move out of traditional sites to lower cost and lower tax locations. Expansion into emerging markets will also present tax challenges requiring efficient international tax and intellectual property structuring.

Corporate governance and financial reporting

US listed chemicals companies subject to Sarbanes-Oxley requirements include both domestic US firms and foreign registrants based in the UK, Europe, and Asia. These companies are reviewing the lessons learned from Sarbanes-Oxley compliance, while listed companies are reviewing IFRS implementation. Under high expectations from stakeholder groups, companies must also address their existing financial and non-financial reporting in order to meet new requirements under the Business Review in order to increase their transparency going forward.

Complying with environmental, health and safety (EHS) regulations and increasing industry standards

Chemicals companies are facing increasing pressure to improve their EHS record, in particular, reducing pollution levels and improving energy and resource use. Regulatory requirements are increasing, with the IPPC directive, EU Emissions Trading Scheme and REACH having significant impact on the transparency of chemicals usage in manufacturing products. Providing a safe environment for workers is also key and contributes towards attracting and retaining a skilled labour force.